JP Morgan Look To Enter Short NOK vs 50/50 CAD/SEK Basket

JP Morgan look to enter a short NOK vs 50/50 CAD and SEK basket in cash (Spot ref 0.9776 / 7.8351. Stop loss -2.50%).

• "The dovish surprises on inflation and wage growth this week could be enough for Norges Bank to show some probability of a June cut in their rate path".
• "With NOK running stronger than Norges Bank forecasts, there is less urgency for the central bank to address any weakness in the Krone. While Riksbank implemented a reserves hedging program with the likely intention to strengthen SEK, Norges Bank are highly unlikely to take the same approach for NOK".
• "This leaves the market with ongoing concerns that Norway’s BoP issues are unaddressed and a potentially structural drag on the currency. This justifies a risk premium in EUR/NOK above fair value in our view, which isn’t priced."
• "NOK is less able to benefit from higher oil if the market becomes concerned about global goods (commodity) inflation once more".
• "The commodity strength however seems to be somewhat demand led (along with global PMI uplift) and so should pose less of a threat to global financial conditions for now. For that reason we choose to add a long CAD element to this trade as a hedge to higher oil prices".